In October, we reported to you that Tesla had a profitable third quarter with $ 1.6 billion in profit. However, even though the automaker’s financial health appears to be in great shape, a bank is pouting. This is the JPMorgan Chase bank.
Indeed, Reuters reported on Monday, November 15 that the bank has just filed a lawsuit against the automaker in the Southern District of New York. The reason for this is because the bank claims Tesla owes it $ 162 million related to a 2014 share purchase warrants deal.
Apparently, the litigation stems from adjustments made by both parties to the deal following a tweet from Elon Musk, the CEO of Tesla, about secured funding that had problematic fallout.
What did the agreement between Tesla and JPMorgan provide?
In 2014, Tesla was looking for funding for the construction of its first Gigafactory. JPMorgan then bought several warrants from Tesla in the same year. These share purchase warrants gave the bank the right to buy Tesla shares at a specified price for a certain period of time. More specifically, these vouchers purchased in 2014 expired in June-July 2021.
Initially, the “strike price” agreed to by both parties was $ 560.63. If the warrants expired and Tesla’s share price was lower than that exercise price, then the two parties owed each other nothing. However, if Tesla’s stock price increases when the warrants expire, then Tesla is supposed to deliver shares equal to the price difference.
Game-changer tweet from Elon Musk created controversy
However, on August 7, 2018, Elon Musk tweeted that he wanted to privatize Tesla at $ 420 a share. Tesla’s CEO said he has investor support and there is already a firm offer. But it was not. The Securities and Exchange Commission actually ran into Elon Musk and the company about the tweet.
Once the truth was revealed, JPMorgan found that Tesla’s stock price was volatile and decided to change the exercise price of the warrants to $ 424.66 and notified Tesla accordingly. On the same day, Elon Musk and Tesla announced that they were abandoning the idea of privatizing the company. JPMorgan then wanted to readjust once again the exercise price of the warrants for 484.35 dollars.
Tesla’s relationship with JPMorgan has deteriorated over the years
But Tesla protested the adjustment, arguing that he quickly abandoned the privatization plan. After that, Tesla wouldn’t have spoken to the bank for six months. Once that deadline passed, attorneys for Tesla reportedly sent a letter to JPMorgan in February 2019 claiming that the bank’s adjustments were ” unreasonably fast and represented an opportunistic attempt to take advantage of changes in Tesla’s stock volatility ».
The bank refuted these allegations and the two parties ceased all communications for 2 years. In August 2020, JPMorgan relaunched Tesla with an adjustment to $ 96.87 but Tesla did not respond. In June-July 2021, when the stock warrants expired, Tesla’s shares had risen sharply and the bank contacted Tesla for encashment but the company renewed its objections for the adjustments.
Apparently, Tesla settled some actions with the bank but did not settle them in full, which would have enforced the early termination clause. In the lawsuit, the bank says Tesla still owes it 228,775 shares, or $ 162,216,628.81 based on the share price at the time.
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Source From: Fredzone
I am a technology author with 8 years of experience in journalism. My writing covers the latest technology advancements and trends, drawing on my expertise in news journalism and social media platforms. I have contributed to major media outlets such as The New York Times, The Wall Street Journal, and Reuters.
